Moody’s downgrades Slovakia’s credit rating

Moody’s has downgraded Slovakia’s credit rating by one notch, from A2 to A3, citing significant institutional challenges amid heightened political tension. Despite this, the outlook has been revised from negative to stable, signalling no immediate plans for further changes.  

The country’s debt remains within the upper medium-grade band, but this is Slovakia’s lowest rating since 2003, during the second government of Mikuláš Dzurinda, reports Index magazine.

Slovakia is now teetering on the lowest rung of the A-rating category, with a further downgrade potentially pushing it into the B category. Credit ratings play a crucial role for investors, assessing the likelihood of a borrower meeting its debt obligations. Higher ratings often translate into lower borrowing costs, while lower ratings indicate increased risk and higher interest rates.

Slovakia last held a B-category rating in the turbulent 1990s under prime minister Vladimír Mečiar, whose policies isolated the country internationally.

Harmful reforms

Moody’s highlights that judicial and media reforms under the current government could weaken institutional checks and balances, while political fragmentation complicates policymaking. Public debt is forecast to rise above comparable peers, with Slovakia’s debt-to-GDP ratio expected to hit 60.4 percent in 2025 and 62 percent by 2026, up from 56.1 percent last year. The budget deficit is projected to climb to 5.9 percent of GDP this year, gradually being reduced to 3.5 percent by 2027—still higher than the government’s target of 2.9 percent.

In the long term, an ageing population is set to strain public finances. According to the European Commission, age-related expenditure is forecast to grow from 20.5 percent of GDP in 2023 to 23.1 percent by 2040, adding an estimated €3–4 billion annually.

Ministry criticises Moody’s

The Finance Ministry disputes the downgrade, stating Moody’s recognises the government’s commitment to fiscal consolidation and the soundness of Slovakia’s economic fundamentals. However, the ministry criticised the agency for focusing excessively on political factors, describing the assessment as “biased and inaccurate.”

Despite the downgrade, the ministry stressed that Slovakia maintains stable ratings from Standard & Poor’s and Fitch. Yet Fitch had already lowered Slovakia’s rating in December 2023, warning of deteriorating public finances and rising expenditure.

Progressive Slovakia, the largest opposition party, seized on the announcement, with MP Štefan Kišš describing it as evidence of declining credibility. Fellow Progressive Slovakia MEP Ľudovít Ódor, a former prime minister, added: “The Tatra Tiger has become a skinny cat after 13 years of Fico’s governance.”